Understanding Business Interruption Insurance for Inns

Imagine this scenario. You own a very popular inn, and reservations are close to capacity for the current season, including several weddings. How would you react if you were forced to close for several weeks because of mandates put in place due to wildfires? What about a plumbing or electrical issue? How might that impact your business, and effect your bottom line?

Fortunately, many carriers offer, and inns purchase, “Business Interruption” insurance which pays for lost profits and continuing fixed expenses during the time it takes to repair and reopen the inn following an insurance claim or after a mandated closure.

In another example, what if a bathtub overflows, damaging the room it is in and the room below it?

You may lose the revenue of both rooms for 10 days while they are being repaired. Your lost profit and fixed expenses, such as cable, utilities, mortgage, and property taxes, could be reimbursed by your insurance carrier for those 10 days. Typically, business interruption insurance has a 3-day (or 72-hour) deductible. This means the first 3 days you are prevented from conducting business, you will not be reimbursed; however, you will be reimbursed for the rest of the time you are closed, starting on day 4.

Only the owner of the inn knows how much a 3-day deductible might hurt your business financially. We encourage our clients to plan for the worst-case scenario, and imagine their business is shut down just before the busiest weekend of the year, whether for a local graduation or a festival. What does losing three or more days of revenue mean to your business?

Many times, you can purchase a lower deductible from your insurance carrier, typically for less than $100 per year in additional premium.

If you have questions, or are concerned you may not have the proper insurance coverage, we encourage you to contact the Merriam Insurance team. We will be happy to discuss your options and assist you in making the correct decision for you and your business.

James Dick, CPCU, AAI

James Dick, CPCU, AAI

Sales Manager
Schenectady, NY 12301-1038

Toll-Free:
(877) MERRIAM x 219
(877) 637-7426 x 219